Should You Participate in the JB Hunt Deferred Compensation Plan?

For senior leaders at J.B. Hunt, the J.B. Hunt Deferred Compensation Plan (DCP) is one of the most powerful tax-savings tool you have available. Since you are likely in a high tax bracket, the ability to defer taxable income is extremely valuable and deserves consideration as a pillar in your financial plan. Once you've maxed out your J.B. Hunt Traditional 401(k), the DCP is your next best option for tax deferral.

While J.B. Hunt DCP isn’t a secret, it’s often underutilized and misused. This is largely because it’s more complex that the 401(k) Plan and investment advisory firms are not incentivized to educate you since they can’t bill on DCP assets. In many cases advisors will convince you that their investment product (e.g. Universal Life Insurance) is more tax-efficient and offers higher returns than the DCP. It's simply not true for high earners because those products are funded with after-tax income, not to mention the fees and commissions you will pay.

Unfortunately, that’s just how the current system works today with Defined Contribution 401(k) Plans and NQDCPs replacing traditional pension plans—meaning it’s on you to educate yourself and make smart, informed choices because nobody else is really incentivized to help you with the DCP.

So, should you participate in the J.B. Hunt Deferred Compensation Plan? Let's break down how the J.B. Hunt DCP works and the three key decisions you need to get right to have maximize your tax savings and set yourself up for some steady income in retirement.

What is the JB Hunt Deferred Compensation Plan?

The J.B. Hunt DCP allows eligible employees (typically, VP+) to defer a portion of pre-tax base salary and bonus to a later date. These deferrals earn investment-like returns, grow tax-deferred and are distributed (and taxed) later, ideally when you’re in a lower tax bracket (e.g. retirement).

Unlike the 401(k), the DCP is a non-qualified plan. Your contributions remain corporate assets. Even though the assets are held in a Rabbi Trust your deferrals carry credit risk in the event of company insolvency.

Now, the 3 big decisions for a successful JB Hunt DCP!

#1 How Much to Contribute?

For eligible JB Hunt employees, the maximum contributions are:

• 85% of Bonus, and

• 50% of Base Salary

Elections are made during a specific window late in the calendar year and impact income earned the following year. In many cases, the bonus is earned the next year but actually pays out in the following tax year.

3 Things to Consider:

• Liquidity: Make sure you keep enough take-home pay (or equity comp.) to cover expenses and other savings goals such as 401(k), HSA and 529 Plans.

• Tax Savings: Deferring income taxed at 32% or higher can meaningfully reduce lifetime tax bills—especially if you expect to be in a lower bracket in retirement.

• Contribution Strategy: Many executives start by deferring part or all of their bonus, then consider adding salary deferrals if cash flow allows.

While some Non-Qualified Deferred Comp Plans such as the Walmart Deferred Compensation Matching Plan (DCMP) and Tyson Executive Savings Plan (ESP) offer employer matches, J.B. Hunt does not. However, J.B. Hunt does allow employees to make after-tax contributions to the 401(k) allowing them to implement the Mega Backdoor Roth strategy to accumulate more in their Roth 401(k).

#2 How to Schedule Your Distributions?

This is where J.B. Hunt’s plan offers some useful flexibility. Each year’s deferral stands on its own and you choose a separate payout schedule for each one. This allows you to stagger payments across retirement years or target future expenses like tuition or sabbaticals.

You have three distribution options, but typically only the Quarterly Installments make sense from a tax perspective:

1. Lump-Sum: One-time payment made soon after you separate from JB Hunt.

2. Quarterly Installments: Participants can opt for installments payments over 2 - 10 years after leaving JB Hunt. To help with cash flow management, the JB Hunt Plan is that you receive quarterly installments instead of the more common annual payments. installments.

3. In-Service Distributions: Choose a date during your JB Hunt career for a payout to cover large, known expenses such as college tuition.

   
   

Tax Bracket Management Tip: To minimize taxes at the time of distribution, be mindful of the amount of the distribution AND other taxable income such as social security, requirement minimum distributions, or earned income from a post-J.B. Hunt job.

Don't Forget the 5+1 Rule

The J.B. Hunt DCP allows flexibility to adjust distribution schedules after the election window, but only if:

1. You do so at least 12 months before the original payout date, AND

2. Delay new payment by at least 5 years

For example, if you initially elected a Lump Sum (which is default option) you'd need to delay the first distribution to at least Year 6.

#3 How to Invest Your Deferrals?

Your contributions are tracked as if invested in mutual fund options available through Merrill. You can choose from a list of low-cost index funds covering equity, bond, real estate, and money markets. I suggest a diversified passive approach using the low-cost funds instead of the more active, more expensive funds. Pretty vanilla stuff, but that is the point.

The J.B. Hunt DCP allows you to update your investment allocation on a daily basis (not that you should). This provides you flexibility in how you invest and strategically adjust your allocation as you approach the distribution phase.

The Key Consideration for investing is your Time Horizon.

Your J.B. Hunt DCP funds are often among the first dollars you’ll tap after leaving JB Hunt, so your time horizon may be shorter than with other retirement accounts. If you’ll need the money within 2–5 years, you may prefer more conservative allocations to reduce the risk of market losses affecting your payout.

So, Should You Participate?

Here’s a simple two-question framework to get you started:

1. Are you currently in a high tax bracket (32% or higher)?

2. Will you likely be in a lower tax bracket at the time of distributions (e.g. 5-10 years to retirement, starting a second career)?

   
   

If you answered Yes to both, it's worth considering contributing to the JB Hunt DCP. It could significantly reduce your lifetime tax burden and provide predictable cash flow in the initial years of retirement.

If you answered No, you have the ability to contribute after-tax contributions (i.e. Mega Backdoor Roth Contribution) to your JB Hunt 401(k) which allows you to contribute up to $70,000 between your Traditional and Roth 401(k) at J.B. Hunt in 2025.

Final Thoughts

The J.B. Hunt DCP is a powerful benefit that can significantly reduce your lifetime tax bill and fund your initial retirement years. The tax deferral, investment options, and quarterly distributions make it a smart tax-efficient tool for many executives.

If you want help evaluating your J.B. Hunt DCP options, ​Taurus Financial Planning​ offers flat-fee financial planning to corporate professionals. No commission-based products. No pressure to move your investment accounts. Just objective advice and guidance for a simple, transparent fee.

Interested in Learning More About Working with TFP? Let's Talk

Thanks for reading,

Mark Chisenhall, CFA, MBA

Financial Advisor | Founder of Taurus Financial Planning

Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.

Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.

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